Taxes on tech firms are "going to go up and they are squealing like stuck pigs."

Last year, the Organisation for Economic Co-operation and Development (OECD)—a group of the world’s top economies—decided it was time to crack down on international tax shenanigans through meaningful reform.

These legal loopholes allow major tech corporations to move money around on paper through a series of shell corporations in Ireland, Bermuda, and the Netherlands. The companies save big, and "best" of all, it’s currently legal! This widespread strategy of moving money around involves two specific tactics better known as the “Dutch Sandwich” and the “Double Irish.”

Starting February 3, the Task Force on the Digital Economy is set to convene at the OECD’s office in Paris to discuss the global corporate response to these potential plans to rein in questionable tax practices. Last week, the OECD published various corporate responses to its initial proposal—needless to say, companies don’t want to stop what they’re doing.

“This kind of tax planning, I believe, will end—the tax rate on the tech firms is going to go up, and they are squealing like stuck pigs,” Edward Kleinbard, a professor of tax law at the University of Southern California, told Ars.

“It is inevitable in a world where every jurisdiction is short of revenue, where every jurisdiction is worried about the fairness of competition of wholly domestic [firms] and multinational companies that seem to reach into the country in commercial terms but without tax purposes. When everyone is worried about that kind of competition, it strikes me as very unlikely that US tech firms will be able to preserve their extraordinarily low effective tax rates. Sooner or later, we’re going to get to a tax reporting system that has some stronger nexus where business is actually conducted.”

Comments

The Dutch sandwich is something that causes a lot of discussion and different opinions. I think governments will eventually find ways to close the loopholes. However, the firms will keep trying to find new ways to pay as less tax as possible.